Rio CEO Sparks Renewed Guinea-Mine Spat With Billionaire

Aug. 8 (Bloomberg) -- Rio Tinto Group said it would be
interested in regaining control of disputed iron-rich ground in
Guinea it was stripped of in 2008, prompting the recipient of
the land to claim Rio has no viable plan for its development.

“We know that there’s iron ore there and clearly that
could be attractive to us depending on how it was offered,”
said Rio Chief Executive Officer Sam Walsh, who was head of the
company’s iron-ore unit at the time the project was seized and
subsequently given to a business linked to Israeli billionaire
Beny Steinmetz. “If it were attractive, we’d be interested.”

Rio is the world’s biggest exporter of the steelmaking
material after Brazil’s Vale SA and today reported first-half
earnings from its iron-ore division of $4.3 billion. It has
previously described Guinea’s Simandou deposit as the world’s
best untapped iron-ore resource. The West African nation has
said the Simandou development may cost $20 billion to build.

Rio currently owns two of four blocks of land at Simandou,
having previously controlled the entire deposit. It was ordered
by the government in 2008 to hand over the northern half to
Steinmetz’s BSG Resources Ltd. In April 2010, Vale agreed to pay
BSGR as much as $2.5 billion for deposits in the country
including Rio’s confiscated assets.

The Simandou blocks 1 and 2 were legally stripped from Rio
because the company failed to proceed with development, other
than drilling six holes over 13 years, BSGR said today.

Not Viable

“Rio is not interested in developing these assets, they
want to prevent others from doing so in order to maintain a
competitive advantage,” BSGR President Asher Avidan said in an
e-mail. Rio’s mining project isn’t commercially viable, he said.

Rio declined to comment on BSGR’s claims.

Rio held talks with Guinea President Alpha Conde in May on
Simandou, including discussion of the disputed ground, amid a
government-led review into mining licenses, Walsh told reporters
today in London. Rio, which has had an interest in the Simandou
area since 1997, is yet to mine the site.

“We’ve pointed out that we had done this work, that we’d
like to get a return on that work,” Walsh said of talks with
Guinea. “The president has made very, very good comments that
the review of blocks 1 and 2 and in fact the implementation of
the mining code of Guinea is in the hands of the bureaucracy and
the departments.”

Walsh said he expected the two blocks would be put up for
tender should the current owners lose their license to the
ground.

Vale Venture

Asked about Walsh’s comments, Vale Chief Executive Officer
Murilo Ferreira said his company has never discussed the issue
with Rio Tinto.

“I was never contacted by Rio Tinto, neither formally nor
informally,” Ferreira told reporters today during a conference
call, without elaborating. “I don’t know about any interest
from them.”

BSGR said in March that Guinea was preparing to strip its
joint venture with Vale of rights to its mining assets in the
country. They had planned a $10 billion mine at Simandou.

A joint investigation by the U.S. Department of Justice and
Guinea has led to the arrests of two BSGR executives in the
African country and the detention of a French citizen, indicted
to stand trial in New York.

Conde “wants to see a proper review,” Walsh said. “He
wants to see justice properly carried out and I give him 10 out
of 10 for that.”

Moussa Cisse, the president’s spokesman, couldn’t be
reached by phone today. Calls to Mines Minister Mahmoud Thiam
also went unanswered.

Infrastructure Funding

Separately, the Rio CEO said he reached an agreement with
the government that would allow a third party to fully fund the
construction of a 650-kilometer (400-mile) rail line linking
Simandou to the coast, and a port to export the iron ore. Rio
had said in April it was waiting for the government to secure
its 51 percent share of the financing.

“It is a change from where we were; however, we need to
bring the project forward and if that facilitates it then we’re
happy with it,” Walsh said. The decision means Rio won’t be
required to fund any of the infrastructure that Liberum Capital
Ltd. had estimated may cost $15 billion to $20 billion.

Conde last year held talks with a delegation of Chinese
companies including Aluminum Corp. of China, or Chinalco, China
Power Investment Corp. and the China Development Bank on
financing for the project’s port and rail. Rio sold Aluminum
Corp. of China Ltd. a 44.65 percent stake in its two Simandou
blocks for $1.35 billion in 2010.

To proceed with the project Rio is waiting for the
government to ratify an accord laying out the conditions of its
investment in the country. Walsh said the government has
indicated this should happen by the end of September, before
going to parliament by the end of the year.

“That’s good news,” he said, adding that meeting a target
of first production by 2015 would prove difficult. “That will
be a good step in terms of taking the project forward.”